Impact of Hungary's Fuel Price Cap: A Synthetic Control Method Analysis of Fuel Consumption

Abstract

The Hungarian government introduced a price cap on fuel on 15 November 2021. Following the implementation of the price regulation, demand increased significantly, with fuel consumption rising by more than 9 percent in 2022 compared to the previous year. This paper analyses the impact of the price regulation on retail fuel consumption using a synthetic control approach. The results show that between November 2021 and November 2022, diesel consumption increased by 6.8 percent and gasoline consumption by 4.5 percent due to the price regulation. After the termination of the policy, fuel demand declined substantially, converging with the synthetic consumption path. These findings provide evidence of the market-distorting effects of the price regulation.